Redistribution and Insurance in Welfare States Around the World

44 Pages Posted: 15 Sep 2020

See all articles by Charlotte Bartels

Charlotte Bartels

German Institute for Economic Research (DIW Berlin) - German Socio Economic Panel

Dirk Neumann

University of Cologne

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Abstract

Redistribution across individuals in a one-year-period framework is an empirically intensely studied question. However, a substantial share of annual redistribution might turn out to serve individual insurance in a longer perspective, reducing the level of actual redistribution across individuals. This paper investigates to what extent long-run redistribution diverges from annual redistribution in welfare states of different types. Exploiting panel data from the Cross-National Equivalent File (CNEF) for Australia, Germany, South Korea, Switzerland, the United Kingdom, and the United States, we find that welfare states like Germany that are assumed to engage in a high level of redistribution actually achieve relatively less redistribution between individuals in the long run than the United Kingdom or the United States. Regression results show that a higher share of elderly in a country is associated with more annual redistribution, but with less long-run redistribution between individuals. The results suggest that, in welfare states with aging populations, we might expect growing annual redistribution that, to a substantial extent, is in fact income smoothing for the elderly.

Keywords: welfare states, redistribution, insurance

JEL Classification: D31, D63, H53, H55, I38

Suggested Citation

Bartels, Charlotte and Neumann, Dirk, Redistribution and Insurance in Welfare States Around the World. IZA Discussion Paper No. 13675, Available at SSRN: https://ssrn.com/abstract=3691388

Charlotte Bartels (Contact Author)

German Institute for Economic Research (DIW Berlin) - German Socio Economic Panel ( email )

DIW Berlin
Berlin, Berlin 14191
Germany

Dirk Neumann

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

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